As Television Goes Digital, Verizon Looks To Embrace Its Tech Heritage With VDMS

Media
I cover the future of television, from broadcast to digital to social

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It was not that long ago that Verizon could do no wrong.

Their mobile phone service was better than everyone else’s, with more bars in more places and fewer dropped calls.

Their FIOS broadband connections really were “blazing fast,” and the speeds didn’t dip during peak hours.

Even the FIOS TV service was highly regarded as it rarely went down and featured a broad array of HD options, back when HD options weren’t a given.

More than that, they’d never developed a reputation for being evil, not the way so many of their competitors had. Verizon customer support was actually friendly, helpful and on the mark and the company seemed to actually care about its customers.

So it’s been baffling to those of us who cover the industry to watch as Verizon seemingly spent the past few years veering from one disastrous decision to the next.

There was the purchase of Intel’s OnCue service and the hardware that went with it that seemed to disappear into the ether that was Go90, a mobile content play that was, at some point, going to be a hybrid of short form and long form, but wound up only being about short form that nobody watched.

There were the purchases of both Yahoo and AOL, two companies that, while still used by millions, seemed about as fresh and relevant as a dial-up modem. And the rebranding of the two companies as “Oath,” which only seemed to emphasize how out-of-date they were.

So that’s the bad news.

The good news is that Verizon has a new CEO on board, Hans Vestberg, a Swede who worked at Ericsson in its glory days. They’re all over 5G too, rolling out tests in Sacramento, Los Angeles and Houston this year. And, more important, they’re doubling down on VDMS (Verizon Digital Media Services), a software and services company that is part of the Oath empire and provides all the pieces necessary to create a full on OTT delivery system.

Speaking with Ralf Jacob, President of VDMS earlier this month, it was hard not to share his sense of enthusiasm for where VDMS and 5G may take Verizon in this new world.

The high level view is that Verizon seems to be embracing its identity as a tech and services company, rather than following AT&T down the media company path.

That means they’re not investing in content beyond Oath, but rather in the technology that allows all that content—and the advertising that funds it—to arrive in our homes via digital broadband, 5G digital broadband in particular.

5G, which is the next level of mobile broadband, is able to deliver speeds of up to 1G. That means it has more than enough bandwidth for users to replace the wired broadband connection they get from their local cable company.(To put things into perspective, 100 mbps, or 1/10th of 1G, is considered to be more than enough bandwidth for a heavy video user.)

In real terms, that means 5G will break the monopoly hold that cable companies have on broadband in most of the U.S., opening the market up to real competition, while hastening the television industry’s move from QAM-based delivery (cable) to digital-based delivery.

“Everybody expected that in 2017, we would have something like 60 or 70 percent of traditional TV converted to digital,” Jacob notes. “Nobody anticipated the stronghold that the broadcasters have on their own content.”

That said, Jacob fully expects close to 80% of linear TV to eventually move to some form of digital delivery. “It’s all about cost effectiveness,” he says. “It's a whole lot cheaper to produce a signal going to an IP line than it is to send it up and down to a satellite.”

That’s where VDMS comes in, as Verizon sees it as a way to take a piece of all that services money as the industry shifts to digital delivery. “We are already working with all of the major broadcasters except one,” Jacob notes.

Beyond services however, there’s a huge amount of money to be made from being the delivery mechanism for the $75 billion TV advertising industry.

VDMS competes with Disney’s BAMTech (among others) and Jacob sees a huge advantage in the fact that with VDMS, advertising is inserted on the server side, rather than on the client side.

Allow me to explain.

With server side ad delivery (“server side stitching” is the usual industry term) ads are placed or “stitched” into the broadcast at the source, so that the viewer receives a single unbroken stream. That all but eliminates the sort of latency issues (e.g., delays) that can happen with client-side ad servers, where the ads are pulled in from third-party servers, which can leave gaps that result in buffering. Server side stitching also eliminates any threats from ad blocking software, as, from a code perspective, the ads become indistinguishable from the programming, as it’s all part of a single unbroken stream.

According to Jacob, VDMS has been able to reduce the lag time between digital and cable on live linear from 90 seconds to as little as 30 seconds, and is working on reducing it further still. He tells me he can see a time when, using server side ad stitching, VDMS is able to provide something close to real time addressable ad serving on linear, a system that would be more or less on par with the sort of header bidding protocols in use with digital advertising today. “We are on the verge of solving all those challenges,” he states.

That would be a huge step forward for the television industry, as currently, ads that are dynamically inserted into linear broadcasts are typically bought weeks, if not months out—certainly nowhere close to real time.

It would also justify Verizon’s purchase of both AOL and Yahoo—Jacob says many of the solutions VDMS relies on are based on systems acquired from the two, which had invested heavily in ad tech.

“Our network is built with video in mind, in anticipation of 5G,” Jacob notes. “And I think that's why other companies are starting to take notice and saying ‘Holy cow they really put all the pieces together: they've got the delivery service, they’ve got the app network services, they've got the network, and they've got the data collection services …there is a lot more to come too, it’s just that the market is not ready yet for some of the things we’ll soon be able to provide.”

That’s a bold vision, but if Verizon can use its technical prowess to become a leader in the content and advertising delivery systems used in digitally delivered TV, the future could once again look very bright for them indeed.

Author of the best-selling "Over The Top: How The Internet Is (Slowly But Surely) Changing The Television Industry." Co-Founder/Lead Analyst at TV[R]EV, where we help companies understand and profit from the seismic changes happening in the industry. I do a lot of speaking...